New Chief at Vestas, Ailing Maker of Wind Turbines

Source: By STANLEY REED, New York Times • Posted: Thursday, August 22, 2013

LONDON — Vestas, the Danish wind turbine maker that once led the industry but that has struggled in recent years, ousted its chief executive on Wednesday and appointed a successor, while also reporting another quarter of lackluster results.

Anders Runevad will succeed Ditlev Engel, who had been chief executive since 2005. Until Mr. Runevad assumes his post on Sept. 1, Vestas will be run by the chief financial officer, Marika Fredriksson, the company said.

Once a star of the wind power industry, Vestas has been under pressure in recent years from the recession in Europe, lower subsidies by various governments for alternative energy and low-cost competition from China. While these factors have squeezed most of the renewable-energy industry, Vestas’s problems have been in many ways of the company’s own making.

The company failed to anticipate a downturn in the global market for wind-powered energy and continued to expand after the boom of the mid-2000s. And analysts say that Vestas has been slower than rivals like General Electric and Siemens to automate production and simplify its product line.

Vestas has also failed to gear up as much as some competitors for the trend toward offshore wind farms in which Siemens is now realizing much of its growth. Only about 7 percent of Vestas’s order backlog at the end of last year was for offshore units. The onshore industry is still bigger, but developers of wind power tend to find less local political opposition to wind towers, which may rise 90 meters, or about 300 feet, and weigh more than 100 tons.

Vestas was tied for global leadership in the turbine business with G.E. last year with 11.8 percent of the market, according to Bloomberg New Energy Finance, a market research firm. But it still lost money in 2011 and 2012 — a period when the global market for new turbines fell to $80 billion in 2012, from $96 billion in 2010.

The offshore market looks better than that for onshore turbines, with new installations expected to grow by 20 percent a year in the future, according to Siemens.

Germany and Britain are the main countries focused on wind projects. While the United States has also shown interest, a rush to beat the expiration of tax credits for wind projects created a boom last year that is expected to be followed by a contraction. The Chinese market, which declined sharply in 2012, is expected to pick up some of the slack.

On Wednesday, Vestas also reported a net loss of 62 million euros, or $83 million, for the second quarter, compared with a loss of 8 million euros in last year’s comparable period. Revenue declined to 1.2 billion euros, compared with 1.6 billion euros a year earlier.

The company’s share price, which has fallen about 85 percent since 2009, was up 5.4 percent on Wednesday in Copenhagen trading.

Clouding Mr. Engel’s final days was the company’s disclosure last week that it had received notice of a lawsuit filed in Denmark this month on behalf of about 80 shareholders seeking about 11 million euros in damages on grounds that executives had not issued timely warnings of the company’s losses. The suit names Mr. Engel and two former executives but does not include Vestas as a defendant.

A similar class-action suit was filed in the United States in 2011. Michael Zarin, a Vestas spokesman, said that the company did not believe the lawsuits had any merit.

Vestas has responded to its operational difficulties with an overhaul effort that included selling factories. Last year, the company sold its towers business in Denmark to a Chinese buyer. Further factory sales are planned.

The company has cut its work force to about 17,250 from 22,700 employees at the end of 2011 and says it will have no more than 16,000 employees by the end of this year.

But in a maturing industry, it is clearly outgunned by G.E. and Siemens, which are big, diversified companies not dependent on any single unit.

Lars Heindorff, an analyst at ABG Sundal Collier, a brokerage firm in Copenhagen, said the company still needed to show further improvement in its key turbine business. “They need to get into more scalable production,” he said, “and in the future I would like to see fewer different turbines.”

The company’s chairman since 2012, Bert Nordberg, a former executive at Ericsson, the Swedish telecommunications company, has already replaced several top executives.

Like Mr. Norberg, Mr. Runevad, the new chief executive, comes from Ericsson, where he was president for Western and Central Europe.

There were some bright spots in the results announced on Wednesday. Orders booked in the quarter nearly doubled, to 1.7 billion euros, or $2.3 billion. Free cash flow, or money available for investment or redistribution to shareholders, was positive, at 197 million euros, compared with a negative 338 million euros a year ago.

But there were signs of other lingering problems. For instance, Vestas cut its estimate of its order book by 400 million euros, to 7.1 billion euros, “due to uncertainty surrounding a few customers’ ability to comply with the contractual obligations.” The company said that about half of the amount “relates” to a Central European customer that it did not name.